Posts Tagged ‘medical costs’

Risk roundup – Nina Kallen posts the latest Cavalcade of Risk at Insurance Coverage Law in Massachusetts – check it out.Mining – Joe Paduda talks about the growth of the mining industry, noting that it is up almost 60% over the last ten years, with an increase of 12% since the beginning of 2011 – a growth rate that looks like it will surpass the BLS ten-year projection of 24%. Joe notes that regulators, work comp executives and providers should be on alert since this growth will have a dramatic impact on selected states, citing North Dakota as one example.Disparity in healthcare costs – Dave DePaolo has an interesting post on the wide disparity in cost for cash paying patients vs insurance. He points to a recent LA Times article that cited numerous real world examples (routine blood work was charged $782 by the hospital, $415 by the insurer, and $95 if paid in cash.) DePaolo asks: “What would fee schedules look like if those in charge of these pricing decisions shared with payers and regulators all of the data that identified each friction point in insurance based reimbursement schedules versus getting paid cash?”Florida drug repackaging – Do the people who write the biggest checks to politicians determine the cost of workers comp in Florida? That’s a question many keep raising, and it appears so. In the article drug-bill battle is lucrative for lobbyists, legislators, Aaron Deslatte of The Orlando Sentinel talks about how Broward County’s Automated Health Care Solutions has invested nearly $6 million into lobbying to protect the practice of drug repackaging by physicians. Why should this issue be of concern to Florida employers and insurers? Joe Paduda offers a primer on repackaged drugs and the effect on work comp costs.E&O and workers comp – Workers’ compensation is the leading cause of agent in E&O claims, accounting for approximately 10% of all claims annually, according to Curt Pearsall. He notes the majority of claims involve the following issues: Questions involving coverage for sole proprietors, partnerships or single-member LLCs; Dealing with a broker to place coverage for that “tough” risk; Dealing with the state workers’ comp market to place coverage; Ensuring employees in all states are covered; Placing clients in a trust/alternative program; and U.S. Longshoreman and Harbor coverage.On reforming SIGS – At LexisNexis Workers’ Compensation Law, John Stahl offers a summary and some of the salient points of the International Association of Industrial Accident Boards and Commissions’ (IAIABC) recent report on self-insurance groups (SIGs): Regulatory Challenges Regarding Self-Insured Groups: Failures Prompt New Regulation. He notes that employers liked the low cost of joining an SIG but did not realize the potential liabilities associated with that choice, and that many employers made the false assumption that they were protected by state regulation. The full IAIABC report is available for $45: Self-Insured Groups for Workers’ Compensation: Effective Regulatory Strategies.CA protects hair care workers – Jon Gelman posts about a groundbreaking settlement in California that protects hair care salon workers. The settlement was between California’s Attorney General and manufacturers of Brazilian Blowout hair smoothing products that contain a cancer-causing chemical. In addition to paying fees and penalties and implementing safeguards for workers, hair care facilities must warn the public about the cancer-causing potential of the chemicals used in the procedure and must cease deceptive advertising.Poultry workers push back – Citing concerns over worker and public health, poultry workers, safety advocates, and groups ranging from the Southern Poverty Law Center and the National Council of LaRaza, to the American Public Health Association and Nebraska Appleseed all united in opposition to USDA’s proposed ‘modernization” plan that would shift work from inspectors to workers. At The Pump Handle, Celeste Monforton talks about this issue: Public health officials urge USDA to withdraw plan to ‘modernize’ poultry inspection, worker and food safety will suffer.A Request for Help Bob Wilson calls all UR hands on deck for participation in Health Strategy Associates’ survey. Learn more here: Your Opinion Needed on Critical Utilization Management Survey.Migration from Mexico – Peter Rousmaniere posts about a recent Pew Hispanic Center Report on Mexican migration, which states that, “The largest wave of immigration in history from a single country to the United States has come to a standstill. After four decades that brought 12 million current immigrants–more than half of whom came illegally–the net migration flow from Mexico to the United States has stopped–and may have reversed.”
Some of the factors cited as contributing to this change include the weakened U.S. job and housing construction markets, heightened border enforcement, a rise in deportations, the growing dangers associated with illegal border crossings, the long-term decline in Mexico’s birth rates and changing economic conditions in Mexico.it would be funny if it weren’t so true – Cartoonist Jen Sorenson issues An Open Letter To The Supreme Court About Health Insurance.Death on the JobThe Weekly Toll.More noteworthy news

We all know that people who smoke and/or are obese tend to have more medical problems, of greater duration, compared to people with healthier lifestyles. The higher medical costs associated with smoking and obesity translate into higher cost for insurance. As a result, it is no surprise that there is a strong trend among employers to charge more for the insurance premiums of workers who smoke or who are obese.The Insurance Journal writes that the use of premium penalties is expected to climb in 2012 to almost 40 percent of large and mid-sized companies, up from 19 percent this year and only 8 percent in 2009. An Aon Hewitt survey released in June found that almost half of employers expect by 2016 to have programs that penalize workers “for not achieving specific health outcomes” such as lowering their weight, up from 10 percent in 2011. The premium surcharges usually come hand-in-hand with incentives to quit smoking and lose weight. Unfortunately, the carrot of incentives, by themselves, have not succeeded in lowering health costs. Hence the big stick.Taxing the Poor?
As is often the case, lower paid workers bear the brunt of the higher costs. Obesity and smoking often – but not always – accompany lower income lifestyles. Low income workers already pay a larger proportion of their income for health insurance; now they will pay more for the consequences of their smoking (a formidably taxed bad habit) and obesity (the result of poor dietary habits). The working poor often live in neighborhoods with limited fresh foods and nothing much in the way of health clubs – which they can’t afford anyway.
There is evidence that the carrot and stick approach actually works. We have written about the Cleveland Clinic, which refuses to hire smokers or obese individuals and which fosters healthy lifestyles among its 40,000 employees. The clinic has seen medical costs grow by only 2 percent this year, far below the national average of 5 to 8 percent.The Big “But…”
The move to force people into healthy lifestyles does raise a few interesting issues.
1. In cases where obesity or other unhealthy conditions are beyond the control of the individual (genetics, specific diseases, etc.), the higher premiums might be considered discriminatory, although there has been little such litigation to date.
2. Healthy lifestyles (including regular exercise) may well result in higher medical costs for maintaining well-tuned bodies: the ever-growing incidence of knee, hip and shoulder replacements among active people.
2. The goal is to reduce medical expenses, but the leverage exists only with the principal policy holder: there is no way to force other family members to abide by the lifestyle guidelines.
3. The imposition of wellness standards can lead to legitimate privacy issues: for example, holding employees accountable for behavior away from the job (smoking, drinking, eating).
If all goes as planned, medical costs will indeed come down and people will live longer and longer lives. As people with healthy lifestyles live longer, we will have succeeded in transferring costs from private insurers (who cover working people and their families) to social security (which covers retirees). That will require a hike in social security taxes, which the working poor, among others, can ill afford. It seems that every solution carries the seeds of new problems, just as every problem gives rise to new solutions. It is a privilege, of course, just to watch the entire process as it unfolds before us.

Risk roundup – Jay and Louise Norris of Colorado Health Insurance Insider host this week’s Cavalcade of Risk – it’s the Colorado nature edition. Congrats to the Norrises on their 5 year blogging anniversary and 10th issue hosting the Cavalcade.Check the facts – At Comp Time, Roberto Ceniceros tells the story of an insurer relying on a newspaper’s crime report as the basis for denying a claimant’s workers comp benefits. While this situation might seem like one that wouldn’t surface all that often, we’d make the case that it is a cautionary tale for anyone who is using social media as an investigative tool.Culture of Caring – Dave DePaolo has an interesting post on how the culture of caring relates to a workplace where the turnover rates are high, like fast food joints. Is high-touch communication and an early return-to-work model as effective when turnover is 120%? We’d note that high turnover is not only an impediment to return to work, it’s no doubt also a factor in the number of injuries that occur. New, untrained workers have more injuries. The Bureau of Labor Statistics data shows that more than 40% of work-related injury claims are filed by workers who have been on the job for 12 months or less, and a NIOSH study found that employees 24 years old or younger are two times more likely to suffer a nonfatal injury than their older co-workers.Medical Costs – In our last news roundup, we linked to the Kaiser Family Foundation’s recent report that average family benefits premiums are up 9%. Joe Paduda of Managed Care Matters offers his thoughts on why premiums are up so much when medical costs are flat.Workplace Violence – Michael Fox of Jottings by an Employer’s Lawyer posts about OSHA’s new directive on procedures for investigating workplace violence complaints. He notes that two industry groups get singled out for particular focus: Healthcare and Social Service Settings and Late-Night Retail Settings.Anniversary of Patel Memo – At Lexis-Nexis, Robin E. Kobayashi commemorates the 10 year anniversary of the Patel Memo. Bonus points to you if you know what the Patel memo is. Here is a clue: it launched an entire workers comp-related industry.Case to watch – The EEOC is suing Texas-based BAE Systems for violating the ADA by firing a man who weighed 680 pounds. The man had worked at his job for 16 years and had logged good performance evaluations. The intersection of obesity and the ADA is one to watch.When light duty runs off the railsSafety News Alert discusses a case of a worker who returned to work on light duty. While on light duty, he received partial disability benefits because the job didn’t pay as much as his previous position. But the employee had trouble getting along with his supervisor and asked to be laid off – which the employer granted. The employee then applied for full work comp benefits. Check out the court’s decision.New blog Well, new to us. TexasM Mutual Insurance Company’s blog has been up and running for about 15 months now, but we just discovered it via our Twitter feed. There are some good posts, particularly some good safety information. Texas Mutual Insurance Company is the state’s leading provider of workers’ compensation insurance, with approximately 32 percent of the market. (And remember, Texas is a state where private employers can choose whether or not to carry workers’ compensation insurance coverage.)Also of interest…

All other things being equal, if you had a choice of paying $300 or $1800 for an abdominal CT scan just by going to a clinic or a doctor in a nearby town, would you? It seems like a trick question or a no brainer, but the reality is people are paying the higher cost every day… just because the transparency in health care costs just isn’t there. And this lack of transparency gives rise to a situation where patients can pay as much as 683% more for the exact same medical procedure in the same town.
More and more people will begin to notice the cost differentials as the trend for consumers bearing increased responsibility for healthcare costs continues. Whether through insurance arrangements such as high deductible plans or through assuming a higher proportion of co-pays and other out-of-pocket costs in more traditional plans, more consumers have a direct stake in the cost of healthcare. Yet the average person with a healthcare insurance policy is in the dark about the costs for various procedures and treatments. First, many consumers have been insulated from the cost of anything beyond the price of the insurance policy itself. The unit cost of services and procedures has largely been a matter between the insurer the provider. Secondly, medical care is a highly complex service with little in the way of tools available for comparison shopping. It’s complex enough that even the treating physicians themselves are often in the dark about costs about specific procedures, tests, or medications.
Change:healthcare, a national organization that is trying to establish more transparency in the cost of healthcare, recently released a cost comparison report for several common medical procedures such as MRIs, CT scans, ultrasounds and PET scans. The Q2 2011 Healthcare Transparency Index reports on what they learned about cost variations by examining claims data over the course of a year for 82,000 employees of small businesses. While it’s been widely understood and acknowledged that price might vary greatly depending on what part of the country you are in, this study shows that the price can also vary greatly depending on which side of the street you are on: inter-regional costs fluctuate widely, too.
This wild divergence in pricing is probably less of a surprise to employers, many of whom who have been keeping a close and wary eye on skyrocketing workers’ compensation medical costs. There are no co-pays or cost sharing mechanisms on the workers comp side of the house – the employer underwrites 100% of the associated costs of a compensable injury or illness. Many enlightened employers have been tackling costs on the macro level (outcomes) as well as on the micro level (unit costs) by seeking high-performing physician networks. But even with the buying power and the resources that a large employer can bring to bear, it can still be difficult to get it right when it comes to managing workers’ compensation medical costs.
Whether in work comp coverage or in general health care, many employers have also recognized the role that the individual employee plays in helping to control costs and stem losses – through behaviors both on the job (safety compliance) and off the job (general wellness and healthy behaviors). Wellness and EAP benefits are widespread as a result. In a similar vein with a potential for a win-win outcome, employers should take every opportunity to help employees to become more savvy consumers of health care services.Here are some consumer healthcare education tools / resources that might be useful in your wellness program:

NCQA: Report Cards – online resources to help you choose a health plan or physician

URAC: Consumer Resource Center – various tools with “information on your rights as a consumer and how to successfully navigate the US healthcare system.”

Foundation for Informed Medical Decision Making – has as its mission “We are working to advance research, policy, and clinical models to ensure that patients understand their choices and have the information and support they need to make sound medical decisions.”

The Dartmouth Atlas of Healthcare – The project uses Medicare data to provide information and analysis about national, regional, and local markets, as well as hospitals and their affiliated physicians.

It’s Health Wonk review week, and Minna Jung serves up the March Madness of both the basketball court and the health care reform process in this week’s Health Wonk Review. Visit this week’s post at the Robert Wood Johnson Foundation’s blog The Users’ Guide to the Health Reform Galaxy.Employer trends

Laura Petrecca of USA Today writes that employers are increasingly using technology to track and monitor employees. They do so for a variety of reasons, including monitoring to ensure productivity; to ensure that trade secrets are protected, and to ensure maintenance of professional and lawsuit-proof workplaces. Next month, the U.S. Supreme Court will hear a case that will explore privacy rights for employees when using employer-supplied devices. View some of the tech monitoring techniques that are being used.

NPR has been running a series on work-life balance and the increasing number of employers who are turning to flexible work schedules. You can read more about it at HR Web Cafe: Work-Life Balance and Flex Work.

Employee compensation costs – Private industry employers spent an average of $27.42 per hour worked for total employee compensation in December 2009 (PDF), according to a report issued last week by the Bureau of Labor Statistics. Wages and salaries accounted for 70.8% of these costs, while benefits accounted for 29.2%. Of the benefits, 8.2% were for the cost of legally mandated benefits.

CT crackdown – Connecticut employers take note – Attorney General Richard Blumenthal is planning a crackdown on workers that are misclassified as independent contractors. “Among the commission’s recommendations: increase the penalty from $300 per violation to $300 a day per violation, strengthen criminal sanctions against misclassification and jointly investigate misclassification complaints with other state agencies.”Immigrant workers – In light of a recent Iowa Supreme Court ruling in a case involving a nonresident alien, Roberto Ceniceros posts about immigrant workers and benefit complexities. To stay current on other related issues, we refer you to Peter Rousmaniere’s Working Immigrants.Toxic chemicals – The Environment News Service writes that the Obama administration is giving mixed signals on right-to-know for toxic chemicals. On the one hand, to increase transparency, the EPA is providing free web access to the Toxic Substances Control Act Chemical Substance Inventory. This is the first time that employers will have access to thousands of industrial chemicals in the agency’s database. But in a move that seems at odds with the administration’s stated commitment to transparency, OSHA is proposing a reduction in the hazard warning information that chemical manufacturers must provide to workers, customers and other users. OSHA denies that it is weakening protections, and according to the article, claims that it is “merely trying to conform with global labeling rules and that manufacturers often disagree with the cancer hazard evaluations and other advisory information.”Medical marijuana – We suspect we’ll be seeing more stories like this: Walmart fires Michigan man for using medical marijuana.The store fired 2008 “Associate of the Year” Joseph Casias when he failed a drug test. Casias has sinus cancer and a brain tumor and has an authorized medical marijuana card. He uses marijuana to control pain at night, but claims that he is never under the influence at work. (See our past posts on this topic: The current buzz on medical marijuana and the workplace and One toke over the line.)Kemper runoff – Hard to believe that it’s been six years, but the Kemper runoff saga is nearing conclusion, according to Business Insurance. Some call this “one of the most successful runoffs in history,” but not all agree. Some are waiting for liquidation to see if they will fare better than the reported 25 cents to 50 cents on the dollar that claims are being settled at:

“A decision to wait for liquidation or settle beforehand should depend on a cost benefit analysis that includes evaluating whether state guaranty funds for workers compensation claims are likely to pay for the majority of a policyholder’s claims, several experts said.

But some states have net-worth exclusions, which eliminate guaranty fund coverage for companies above certain net worth levels, which range from $10 million to $50 million depending on the state, several sources said.”

Over the last twenty years, medical costs have gradually, but steadily, replaced indemnity wage replacement as the engine driving the workers’ compensation train. This is the same period during which our nation’s health care costs have grown from average among OECD countries (Organization for Economic Cooperation and Economic Development) to double the average (PDF). In other words, workers’ compensation medical cost increases reflect similar increases within the general public. The only surprising thing here is that during the last decade or so, the steady increase in workers’ compensation medical costs has happened at twice the rate of those eye-popping group health increases.
The National Council on Compensation Insurance (NCCI) has convincingly demonstrated that the rise in workers’ compensation medical costs is due primarily to over-utilization of physical medicine services, especially those for chronic, soft tissue claims. (See here (PDF) and here (PDF ). And now, Atul Gawande, writing in the June 1, 2009 issue of The New Yorker, has demonstrated even more convincingly that over-utilization of medical services, including testing, surgery and hospitalization, is the metastasizing cancer in America’s health care system.
Dr. Gawande’s lengthy article, The Cost Conundrum, for which he should win the Pulitzer Prize, is the most trenchant argument yet for why costs in America are so appallingly high, but outcomes merely mediocre. He reduces the problem to its simplest terms. In essence, our American health care house that Jack built has turned the once noble profession of medicine into nothing more than assembly line piecemeal work, and our physicians both in primary care and the specialties, have been economically incentivized to over-prescribe in all areas. And, as Gawande’s article clearly shows, the areas of the country that produce the highest costs with all that over-prescribing also produce the poorest health care results.
Dr. Gawande examines health care in McAllen, Texas, a town within Hidalgo County, the County with the lowest household income in the country, but, after Miami, the second most expensive health care costs. He wanted to know why. He also wanted to know why health care costs in El Paso County, eight hundred miles to the north with similar demographics to Hidalgo’s, were 50% lower.
He wanted to know why the Mayo Clinic, in Rochester, Minnesota, with the best medical technology on the planet, produced some of the highest quality medical care in the nation, but with costs that rank in the lowest fifteen percent of the nation. And why the Mayo was able to replicate that achievement when it opened its hospital medical center in Florida, one of the country’s highest cost states for health care?
His answer? Because in the pockets of excellence he found around the country doctors work together in teams, peer-reviewing each other’s work. In these low-cost, high-quality areas, physician income is neutralized. At the Mayo, for example, the doctors are all on salary. Whether they order ten procedures or none, they get paid the same. This is central to understanding how to fix the problem. As Gawande writes:

“Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coordination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.
This last point is vital. Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care.”

The Cost Conundrum, by Atul Gawande, should be required reading for anyone interested in understanding and participating in American health care reform. And that should be all of us.

For the last 3 or 4 years, I’ve been privileged to be a Trustee at Commonwealth Care Alliance, a Massachusetts non-profit HMO serving dual eligible elderly poor. In this case, “dual eligible” means people who qualify for both Medicare and Medicaid. CCA does great work, but it’s always swimming upstream. It gets reimbursed by increasingly low and lower Medicare and Medicaid payments. And let’s face it, the elderly poor do not constitute an influential political constituency.
One of CCA’s founding Board members is Rob Restuccia. In the early 1990s, Rob founded Health Care For All (HCFA), a non-profit health care think tank and advocacy organization devoted to creating a “consumer-centered health care system that provides comprehensive, affordable, accessible, culturally competent, high-quality care and consumer education for everyone, especially the most vulnerable.” You see, Rob believes health care is a basic human right, not a privilege for those who are lucky enough to be able to afford it — a position with which I wholeheartedly agree. HFCA was a central player in the successful effort to pass the Massachusetts Health Care Reform Plan, which, to date, has brought health care to 97.4 percent of its citizens. Universal coverage is a reality in Massachusetts, albeit a more expensive one than originally thought.
The founders of HCFA and its public interest and very influential law firm, Health Law Advocates, are the alumni who came out of the Dukakis Administration and who continue, with lance in hand, to attack the biggest windmills they can find, and, as the Massachusetts Commonwealth Connector proves, those lances are still sharp.
Rob now runs Community Catalyst, a powerful, grass-roots, national non-profit, active in more than 40 states and dedicated to bringing affordable, quality health care to everyone in America. You’ve probably never heard of it, but I assure you that the dealmakers on Capital Hill are well-aware of Community Catalyst.
As I have written before, health care within worker’ compensation, at only two to three percent of total health care spending, is the tiny caboose on the back of the great big group health locomotive. But workers’ compensation medical costs have increased at roughly twice the rate of group health annual increases for a dozen or more years, and most experts agree that the biggest engine fueling the constantly rising comp medical costs is over-utilization, which itself is driven in large part by a lack of coordinated care.
Rob Restuccia’s Community Catalyst has just published a white paper on Coordinated Care, Special Delivery: How Coordinated Care Programs Can Improve Quality and Save Costs. This paper does not focus on coordinated care within workers’ compensation. Its logically larger aim is to influence care in the other ninety-seven percent of medical spending. However, the absolutely common sense points it makes and lessons it preaches can, and I suggest, should be applied to the world of workers comp.
It deserves to be read by everyone involved in the current health care debate.

It’s Cavalcade of Risk day, and Louise Norris has an Independence day edition posted at Colorado Health Insurance Insider. Louise and her husband Jay have an interesting story about how they came to the field of health insurance: literally, through the school of hard knocks after intersecting with the health care industry through personal experience, a series of sports-related injuries. Today, as a locally-owned Colorado brokerage, they are respected health insurance consultants. One nice thing about the web is how an informative site such as theirs can serve as a great equalizer for smaller entrepreneurial firms – if you live in Colorado, they sound like great people to do business with.
Meanwhile, check out today’s edition. There’s a lot of good reading material linked – be sure to catch Nancy Germond’s entry on writing a workplace incident report and Joe Paduda’s entry on the horrors of universal coverage. And while over at Joe’s place, also see his post on workers comp – the hospital profit engine – it’s a real eye opener. Here’s a teaser: “The entire US hospital industry generated profits of roughly $25 billion, workers’ compensation – which you will remember represents only about 1.5% of total hospital revenues – accounts for approximately 16 percent of all the profits for US hospitals.” He follows this post with another on DRGs, Medicare, hospitals, and workers comp, where he delves into further explanation for the costs. If you work in workers comp or managed care, these are must-read posts.Bill Moyers on the poultry industry and worker safety – We’ve blogged several times about the appalling state of safety in the poultry and meat packing industries. This year, there has been a concerted focus on the poultry industry, largely thanks to the excellent investigative journalism in the Charlotte Observer’sThe Cruelest Cuts, a six-part multimedia series – well worth exploration if you missed it first time around. Now, Bill Moyers has picked up the ball, covering the topic in a 22 minute investigative report of the poultry industry (video clip), which shows how official statistics showing a drop in workplace injuries may have been the result of deceptive reporting. See much more information on poultry worker safety at Bill Moyers’ Journal on PBS.

In Part One of this series, we began looking at some of the many cost disparities between group health and workers’ compensation.
In Part Two, we compared US health care costs with costs in the other 29 member-countries of the Organization for Economic Cooperation and Development (OECD). OECD countries, all democracies, are considered the most economically advanced in the world. We saw that health care spending in the US is a breathtaking 250% greater than the average for all of these developed democracies. Moreover, as measured by Gross Domestic Product (GDP), health care made up 15.3% of the US economy in 2004 – up from 5.1% in 1960 – nearly double the rest of the OECD.
Today, it’s time to examine what we’re getting for all that money. It seems fair to ask a few questions relative to the other OECD countries:
1. Do we live longer?
2. Are we healthier?
3. What other factors could affect how the health of US citizens compares with OECD citizens?Do we live longer than people in other OECD countries?
Simply put, we spend a lot more on healthcare than all other OECD countries, but don’t live any longer for the money. In fact, we live shorter lives than most.
As of 2004, average life expectancy at birth in the US was 77.5 years, which ranks 22nd out of the 30 OECD countries. While this is slightly below the OECD average, it is four and a half years less than top-ranked Japan. Also, it may surprise readers to learn that life expectancy is two and a half years longer among the people of our neighbor to the north, Canada. And, despite all the editorial bashing of the UK’s National Health System, its citizens outlast us by a full year, while people in Spain, France, and Italy live, on average, more than two years longer than we do.Are we healthier?
For all the money we spend on healthcare one would think we enjoy Olympian health, but this does not appear to be the case. Although it pains me to write this, I can find no peer-reviewed studies that conclude that we are a healthier people than our OECD neighbors.
The OECD provides specific disease incidence data in two areas: cancer (malignant neoplasms) and acquired immunodeficiency syndrome (AIDS). In both cases, the US has the highest rates in the OECD. The incidence of cancer in the United States is 34% higher than the average within the OECD (358 cases per 100,000 people versus 266). With respect to AIDS, the US incidence is an astonishing 675% higher than the rest of the OECD (147 cases per 100,000 people versus 19 in the OECD). Our mortality rate due to AIDS ranks second in the OECD (4.2 deaths per 100,000 people, well behind the staggering rate of 8.6 in Portugal). Yet our mortality rate for cancer ranks only 14th among OECD countries.
What about obesity, reputed by many to be epidemic in the US? With the exception of the UK and the US, which get their obesity statistics by actually measuring people, OECD countries get their results from surveys, so the only fair comparison is the US versus the UK. In 2004, while the UK’s overweight population was 14% higher than that in the US, our obese population was 39% greater.
On the other hand, the US rate of alcohol consumption and incidence of daily smoking were both lower than the average for OECD countries (daily smoking in the US is the third lowest (17%) of all OECD members).
Unfortunately, obesity has been shown to be a greater driver of health care and health care spending than alcohol consumption or smoking – “the effects of obesity are similar to 20 years of aging (PDF).” According to Thorpe, et al, (The Impact of Obesity on Rising Medical Spending (PDF), Health Affairs, 20 October 2004), 27% of the per capita increase in US health care spending between 1987 and 2001 was attributable to obesity. There is a direct correlation between obesity and Type 2 diabetes and obesity and hypertension. Is it any wonder that in the last thirty years Type 2 diabetes and hypertension have seen explosive growth in the US?What other factors could affect how the health of US citizens compares with OECD citizens?
There are many other factors that have been identified as influencing how the health of Americans compares with the rest of the OECD. Some of these are:
1. The age of our population – While this will be a concern in the immediate future as baby boomers grow older, currently 12% of the US population is older than 65, which is below the OECD average of 14%.
2. Income and insurance – The US is unique in the OECD, because it does not have a national insurance program. About 60% of us are covered by some form of employer-provided insurance. Another 26% are covered by Medicare or Medicaid. That leaves 14% who are uninsured in any way. Among this group, most of whom are poor and many of whom are sick, healthcare often goes a-begging, with harmful results. For example, hypertension is less controlled in this group, “sufficiently so that the annual likelihood of death in that group rose approximately 10%.” (Newhouse et al, Free for All? Lessons from the RAND Health Insurance Experiment, Harvard University Press, 1993).
Twenty-two OECD countries provide more than 98% of their citizens with public health insurance covering at least hospital and in-patient care. Despite this, Americans spend less out-of-pocket than the people of most other OECD countries – 13.2%. The OECD average is nearly 20%. Studies have shown that when a people pay less out-of-pocket for healthcare, total spending rises.
3. Sophisticated medical procedures – In the movie Pat and Mike, Spencer Tracy famously said of Katherine Hepburn, “There’s not much meat on her, but what there is is choice.” The same can be said for hospitalizations in the US. Although hospital stays are fewer and shorter, a lot of high-powered activity goes on.
For example, the US ranks in the top five OECD countries for the rate of caesarean section childbirths as well as all forms of organ transplants with the exception of lung transplants. Moreover, we’re in the top five for all four of the heart procedures on which the OECD collects data. We perform coronary bypass surgery and angioplasties at more than double the rate of the OECD average. Finally, we perform far more coronary revascularization procedures than any other OECD country. Despite performing substantially more invasive heart procedures than all other OECD countries, death rates for heart disease in the US are the 17th worst in the entire group.
4. Advertising – Between 1996 and 2003, pharmaceutical advertising quadrupled. Turn on the nightly news and count the ads for prescription drugs. Only two countries in the world allow this, the US and New Zealand. I find it amazing that more than 75% of the brands advertised had ROIs of more than 50%. Clearly, Americans respond to direct-to- consumer drug advertising, which is one reason why we spend double the OECD average on prescription drugs.How does this all relate to workers’ compensation?
We’ve seen that, despite spending more on healthcare than any other country in the world, Americans don’t live longer or enjoy better health than citizens of any other OECD country. But every day, medicine practiced within workers’ compensation depends entirely on the US healthcare “system,” if we want to go so far as to call it that. It’s certainly systemic, but perhaps systemic in a lot of the wrong ways.Prior entries in this series:Part Two – What does it cost?Part One: The best Health Care Plan in America